Heating costs to rise this winter as cold returns

Wednesday, October 10, 2012 8:03 PM

In this Jan. 2, 2008, file photo, Wayne Holland of the Suburban Propane company delivers oil in Barre, Vt. Americans will pay more to heat their homes during the 2012-2013 winter season as they feel something they didn’t feel much of last year: cold. Fuel prices will be relatively stable, but customers will have to use more energy to keep warm than they did a year ago, according to the annual Winter Fuels Outlook from the Energy Department’s Energy Information Administration. (AP Photo/Toby Talbot, File)

By JONATHAN FAHEY

AP Energy Writer

NEW YORK (AP) - Americans will pay more to heat their homes this winter as they feel something they didn't feel much of last year: cold.

Fuel prices will be relatively stable, but customers will have to use more energy to keep warm than they did a year ago, according to the annual Winter Fuels Outlook from the Energy Department's Energy Information Administration.

Last winter was the warmest on record. This year temperatures are expected to be close to normal.

Heating oil customers are expected to pay the highest heating oil prices ever. That will result in record heating bills, with an average of $2,494. That's nearly $200 more than the previous high, set in the winter of 2010-2011.

Customers who use natural gas, electricity or propane will see lower bills than they have in previous typical winters - even with the increase over last year - because prices are relatively low.

"It's two different worlds. For most families this is still going to be an affordable year, except for those who use oil heat," says Mark Wolfe, the Executive Director of the National Energy Assistance Director's Association. "For them, it's going to be very difficult."

Just 6 percent of the nation's households use heating oil, but they tend to be in some of the coldest parts of the country where heating needs are high, mainly in the Northeast. About half use natural gas for heat and 38 percent use electricity. Five percent of households use propane and 2 percent use wood.

Natural gas prices will average $10.32 per thousand cubic feet. That's 0.8 percent higher than last year but 13 percent lower than the five-year average. Electricity prices will fall 2.3 percent to 11.4 cents per kilowatt hour. Propane prices will fall 8 percent in the Midwest to $2.02 per gallon and 13 percent in the Northeast to $2.95 per gallon.

Natural gas, propane and electricity prices are relatively low because of a dramatic increase in domestic natural gas production over the last five years. Natural gas is used to generate about one-third of the nation's electricity and it is instrumental in setting the price of electricity. Recently drillers have been increasing production of so-called natural gas liquids, including propane.

Heating oil will average a record high of $3.80 per gallon because it is made from crude oil. Crude is priced globally, and has stayed high because of increasing world demand, worries about supply disruptions in the Middle East, and stimulus programs from central banks around the world that encourage investment in oil and other commodities.

But most of this year's increase is because forecasters expect a more typical winter. East of the Rockies, weather is expected to be about 2 percent warmer than normal but 20 percent to 27 percent colder than last year. In the West, temperatures were closer to normal last year, so the expected increase for this winter is just 1 percent.